There are actually a few different types of life insurance that you can consider. For instance there is:
- Joint life insurance: shared with your partner, but only pays out once
- Renewable term: covered for a fixed period and then can be renewed after a medical check
- Increasing term: in this case, payouts rise each year, based on levels of inflation, but this means higher premiums
- Decreasing term: the potential payout falls each year, typically to reflect that mortgage debts are falling off. As such, a lower payout is necessary
- Term insurance: this guarantees a payout, but only if you pass away within a fixed term. This can be cheaper than whole life insurance.
What Is Whole Life Insurance?
As the name suggests, this policy is designed to provide the maximum level of coverage for you and your dependents. With this policy, it doesn’t matter when you pass away as there is no fixed term. Typically, these policies will cost more than others because they pay out regardless of circumstances.
Benefits Of Whole Life Insurance
One of the main benefits and indeed the reasons people opt for whole-life insurance is due to the tax incentives. The family’s tax bill and in particular the inheritance tax is reduced with this choice.
IHT is typically 40% of assets over 325K. With a whole life insurance policy, it is possible to provide your beneficiaries with a full lump sum which is tax-free. This can then be used to cover the IHT cost.
Aside from this, whole life insurance policies provide complete peace of mind. Unlike other options you won’t have to worry about renewals or medical checks. You won’t even have to worry about not being covered because you pass away outside the term time. As such, while more expensive, it can be far less stressful. Once you have ordered and arranged your life insurance policy, assuming you keep paying, you will be set for life.
Typically with these life insurance policies, premiums will remain at a fixed point for ten years. After this they will usually be evaluated and they could rise or fall.
Furthermore, the cash value of the policy is not subject to or impacted by market losses. If the stock market falls or the economy crashes, your whole life insurance policy will remain at the same level.
If you are keen to arrange a full, tax-free lump sum of cash for your beneficiaries in a policy that is easy to manage and understand, whole life insurance could certainly be the choice for you. Some policies even provide you with options to borrow or save the cash sum so you can have complete control over what you’re paying for. While usually more costly, the benefits of whole life insurance certainly make it worth the price.
For more information about Whole Life Insurance and how it can work for you, please reach out to Jonathan at Leonard Financial Solutions today.
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